academic research | Consumer Value Creation

We all have been in situations where you are browsing the internet and the advertising is targeted on the content on the website and they are shown to you. Hereby, advertising is targeted. And what is maybe even more intrusive, that the advertising pops up. It definitely gets your attention. However, are you more willing to click on the advertising and buy the product? This is what Goldfarb & Tucker (2011) researched. They study the effect of targeted display advertising and obtrusiveness on sales, and what the effect is when these two are combined.

This question is interesting. Because even with all these new techniques, display advertising success drops. People avoid online display advertising because they infer them in their browsing goals (Drèze & Hussherr 2003). Do obtrusive advertising works exactly in the opposite way and affects the effectiveness of advertising negatively?

To find out, this study uses data from a large randomized field experiment on 2,892 web advertising campaigns. For every campaign on average 852 surveys were distributed. Where the half of them were to consumers who have seen the advertising and the other half were on the website without the advertisement on it.

The main results of this study are that targeting the advertising improves the effectiveness of online display advertising and obtrusiveness does also. However, when these two techniques are combined the effectiveness decreases. This is because privacy concerns temper the appreciation of formativeness in targeted advertising. So, for advertising in categories where privacy matters more, the effect is tempered more than in categories where privacy matters less.

The strength of this paper is the fact that it, in contrast to earlier research, propose that obtrusive advertising is not very effective in the contextually targeted situations. Earlier research study the effect of the obtrusiveness on advertising recall, which is of course positive. By adding the privacy concerns and the feelings of manipulation to the fact that advertising can be perceived as useful makes advertising perceived as intrusive, and therefore result the effectiveness negatively.

This paper shows a reason for the unexpected success of search advertising, where the advertising is highly targeted on the context (the advertising is based on search keywords) but is absolutely not obtrusive or attractive. For managers, this means that in choosing the right way to advertise they must not only consider whether to target their audience with contextually targeted advertising, but also consider the negative influence if these advertisements are obtrusive. Economically, 5.3 percent of advertising spending could be cut, without affecting the effectiveness of advertising. This, solely because the wrong combination of advertising content and format is used.

In short terms, either choose to reach your audience with targeted advertising, or with obtrusive advertising. But don’t combine the two.

Drèze, X. & Hussherr, F.X., 2003. Internet advertising: Is anybody watching? Journal of Interactive Marketing, 17(4), pp.8–23.

Goldfarb, A. & Tucker, C., 2011. Online Display Advertising: Targeting and Obtrusiveness. Marketing Science, 30(3), pp.389–404.

Big data and data collection are often seen in a negative daylight, as public attention to big data gathering usually results in unwanted attention for organizations. The other side of the story is that such data collection is usually the result of organizations wanting to deliver personalized services more effectively. In cases where the user becomes skeptical when asked to share their personal and private data, organizations provide an (additional) incentive to mitigate their perceived risk. In the case of recent developments in mobile shopping services, there is a balance between the perceived value and the perceived risk of sharing private information of the customer Xu et al. noted [1]. An easy example of this the case of a customer of having an empty stomach, an empty fridge at 10pm and a connected smartphone. Will he decide to give out his location-based information to a mobile service in order to look for food ordering opportunities or will he not? Will he value the potential to find food less than his location-based information at that hour? You decide.

Furthermore, Xu et al. found that the usage of location-based services is correlated to monetary incentives. Individuals are more willing to disclose their locality to location-based services when offered a financial incentive, Xu et al. have found in their research [1]. The financial incentive is often given in the form of some future saving, implying that there is money to be gained in future expenses. These incentives often take the form in discounts on related services or rebates. Some skeptics have been in agreement with having their personalized data shared in trade for an additional incentive. When asked about their rationalization, some skeptics claim that ‘the risk is worth the gain’ while others state that they have ‘serious concerns’ about sharing their information. If you think that the former is non-existent, please consider the example of the guy with the empty stomach again.

The location-based are services that require more personal and private information in order to function better. The so-called personalization privacy paradox is the epitome of the previous statement; the better services an individual wants or requires, the more willing he has to be to share his personal information. Xu et al. have found that using personalized services could help individuals in superseding their privacy concerns. When addressing the paradox, the authors imply that if customers are more knowledgeable of the service that they require, they make a more rational decision. If the customers have high privacy concerns towards the use of personalized services, they are less inclined to consider using the service and will automatically consider alternate opportunities (in case of the hungry customer, he could use the ‘service’ of asking his physical neighbor for information) and therefore are not part the targeted demographic Pappas et al. imply [2]. In addition, if the location-based services give the option to the consumer to control the use of their personalized information, the mitigated effect might tempt critics to use the service after all [3], although future research would have to investigate this in more detail.

In the end, the rule of thumb is: “when (information) services are offered for free, you are paying with your personal data”. Some people are okay with this, and that is… okay.

Disclaimer: Although largely based on the article of Xu et al. [1], the opinion presented in this article does not portray the sentiment in the paper itself. The opinion presented in this article rests solely by the author and by none of the authors cited in this article. Critics are free to comment below, and are encouraged to do so.

References
[1] Xu, H., Luo, X. R., Carroll, J. M., & Rosson, M. B. (2011). The personalization privacy paradox: An exploratory study of decision making process for location-aware marketing. Decision Support Systems, 51(1), 42-52.
[2] Pappas, I. O., Giannakos, M. N., & Chrissikopoulos, V. (2012, June). Personalized services in online shopping: Enjoyment and privacy. In Information Society (i-Society), 2012 International Conference on (pp. 168-173). IEEE.
[3] Schwaig, K. S., Segars, A. H., Grover, V., & Fiedler, K. D. (2013). A model of consumers’ perceptions of the invasion of information privacy. Information & Management, 50(1), 1-12.

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